The NSW government’s offer to first-time home purchasers to replace stamp duty with an annual land tax has received widespread praise, but the Labor opposition has retaliated, saying the scheme will end up costing homeowners far more in the long term.
Chris Minns, the leader of Labor, made the assertion on Facebook and provided evidence in the form of a graph showing that, in ten years, land tax on a recently sold house in western Sydney will surpass the one-time stamp duty.
The Liberals only want to tax your house permanently because they want to increase your taxes, Mr. Minns wrote.
“A first-time buyer would pay more than they ever would have before if they purchased this property, which sold yesterday, under Dominic Perrottet’s plan within 10 years.”
The worst part is? It is perpetual. This tax on your house will end immediately.
A property in the western suburbs that sold for $980,000 with a land value of $760,000 served as the basis for the modeling.
Stamp duty, which was estimated at $39,190 based on the sale price, is a one-time payment.
According to Labor’s calculations, if the property buyer elected to pay land tax instead, which is determined on 0.3% of the land value per year plus a flat cost of $400, they would be out of pocket $41,787 by 2033.
However, it should be emphasized that, according to NSW Treasury, the average length a buyer keeps a house is 10 years.
The graph makes the assumptions that land and property prices would rise at a long-term average annual rate of 7% and the economy would expand in line with budget projections.
The buyer’s taxes would rise to $1500 plus 1.1% of the property value if they moved out but kept the residence as an investment.
Despite opposing the government’s plan, Labor hasn’t yet said how they want to assist first-time homebuyers in the market.
According to a spokesman for NSW Treasurer Matt Kean, the program aided first-time homebuyers by giving them options.
A spokesman said: “An online calculator would help first-time home purchasers make an informed decision when they buy a property and possibly remove the barrier of a big upfront price.”
“A first home buyer buying an apartment in Sydney for $830,000 with a land value of $265,000 will have the option of paying an initial annual property charge of $1,195 or upfront stamp duty of $32,440.”
On January 16, the program to avoid paying stamp duty goes into effect.
Eligible first-time buyers will have the option to opt-in and obtain a refund of already paid stamp duty for contracts exchanged between the legislation’s enactment and January 15, 2023.
Only residences under $1,500,000 will be eligible for the option to forgo paying stamp duty, and buyers must move into the property within a year of purchasing it and stay there for six continuous months.
There will be no changes to the current policy, which exempts first-time homebuyers from paying any stamp duty on homes up to $650,000 while maintaining a rebate for residences up to $800,000.
Dominic O’Sullivan, a professor of political science at Charles Sturt University, praised the proposal as ambitious but acknowledged its potential drawbacks.
“The drawback of this policy change is that it may result in consumers paying more throughout the course of their ownership of the home,” he said.
The advantage, though, is that it makes it simpler for consumers to enter the real estate market more quickly.
The removal of stamp duty was broadly praised by other analysts and participants in the real estate sector.
Stamp duty tax is “the worst thing in Australia,” according to Ken Morrison, chief executive of The Property Council of Australia, since it “distorts behavior, cripples job creation, slows growth, and locks individuals into properties that may not be appropriate for their requirements.”
It’s likely the state’s most despised tax, according to Tim Lawless, head of research at real estate analytics company CoreLogic Australia, who spoke to Daily Mail Australia.
This is true since it is a transactional tax. You must pay this tax in exchange for the right to buy real estate. Additionally, it is a substantial tax.
Mr. Lawless concurred that getting rid of the lump payment would be a wise decision.
He stated, “It removes one of the main obstacles for homebuyers.”
“The tax has been a significant barrier to people entering the industry.”
Consequently, spreading out the initial cost over a long period of time is a far more sensible and effective way to administer that tax.
When he served as treasurer, former NSW Premier Dominic Perrottet referred to stamp duty as “the worst tax a government could have.”
For first-time home buyers looking for a place to call their own, he said, “We want to remove the obstacles to owning a home.”
The percentage of first-time buyers under 35 has decreased from 67% to 61% over the last two decades. Lifting house ownership is one of the ways that this government hopes to assist struggling families.
The First Home Buyer Choice will assist first-time homebuyers have a better future by removing one of the biggest up-front payments.
According to Revenue NSW, the NSW government receives 32% of its income from stamp duty, which totaled $12.2 billion in the 10 months leading up to April 2022.
As home prices rose dramatically ten years ago, this increased from 18.3%.
Stamp duty revenue totaled $9.6 billion in the fiscal year 2020–2021.
According to NSW Treasury, implementing a land tax would result in around 20% less money being collected than under the current system.
Stamp duty receipts totaled $9.6 billion for the 2020–2021 fiscal year.
The state government is anticipated to have collected $14 billion in stamp duty by June 30, 2021–2022, despite recent easing off in home prices and even a decline in some suburbs.
During the Covid epidemic, stamp duty revenue increased significantly each month, rising from a low of $450 million in May 2020 to a peak of $1.6 billion in October and December 2021.
Due to a stabilization or decline in housing prices, the amount fell to $976 million in April.